Bull Market Turns 10

March 9, 2019, marked the 10th anniversary
of the current bull market, the longest-running in U.S. history. In that decade,
the market more than quadrupled, and when you factor in dividends, it’s up
fivefold.1

The short-term spikes over the past
few years coupled with corporate share buybacks have served to keep performance
humming. As we move forward, a few points of note:2

The Federal
Reserve has recently exercised more patience when it comes to raising rates,
which has helped stabilize long-term yields in the bond market.

Some market
analysts say 2019 will feature slower earnings growth, as evidenced by the
first quarter drop in earnings estimates.

While there’s
little talk of a recession starting this year, overall growth prospects are
expected to diminish.

While growth
stocks have been outperforming value stocks, those positions could reverse as
growth subdues.

According to Citi Research, the U.S.
stock market has been driven by share buybacks more than by new investor money
over the past year. In 2018, corporate share buybacks reached a new record at more
than $800 billion, and that trend was expected to continue through this year — fueled
by money repatriated from overseas.3 At the same time, after last
December’s stock market slump — the worst in 87 years — the market also saw
significant outflows.4

With that said, whether you should
invest more money in the market or transition to a more conservative allocation
depends entirely on your own financial needs and circumstances. It’s a good
idea to check in with your financial advisor periodically to weigh your current
portfolio positions against your stated goals and timeline. Feel free to
contact us for a portfolio consultation or a second opinion.

Credit Suisse’s forecast is
bullish for the rest of 2019, positing up to a 20 percent gain on the year and
earnings growth rate of 4.4 percent. The wealth manager says it sees the Fed’s
more moderated stance, diminished fears of higher inflation and the potential
for a favorable trade agreement with China as driving forces for lower
volatility and the potential for higher stock market performance.5

According to LPL Financial Research,
historical performance in relation to election years can provide some context
for stock market forecasts. For example:6

In every midterm
election (18) since World War II, the S&P 500 has risen in the following
year and boasted an average return of 14.5 percent.

The third year of
a president’s first term, as re-election is in their sights, also tends to
yield a strong economy as the incumbent wants to set the stage for positive
campaign messages. Over the past 19 years, the market has averaged a 15 percent
increase in the third year of a president’s first term.

Another positive
factor is a party split between the executive office and the two branches in
Congress. This scenario generally leads to policy and legislative gridlock —
and as far as the market is concerned, no major change is good news.

Goldman Sachs is a bit more bearish about the rest of the
year. Analysts there expect weak profit growth across all sectors with relatively
low returns and a narrow trading range. Peter Oppenheimer, chief global equity strategist at
Goldman Sachs, points to ongoing trade disputes with China, Brexit uncertainty
and general global concerns.7

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